New memos show
The Committees are publishing the minutes of a 29 July 2013 pension scheme valuation meeting between Carillion’s pension scheme trustees and The Pension Regulator, following evidence from TPR in Parliament this morning. In the session, Work and Pensions Chair Frank Field cited the Trustee’s understanding that former Finance Director Richard Adam thought funding pensions was a “waste of money”.
Key points from the minutes:
Low prioritisation of pension schemes and Company not paying what it was otherwise believed it could afford:
- “The Trustee Representatives said that the Trustee does not believe it is being offered contributions reflecting the Company’s maximum affordability and is of the opinion that the Schemes are falling further behind the Company’s other stakeholders as time goes on.”
- “Since 2008 the Company has shrunk by 20% but cash generation has significantly increased. However, a large amount (and nearly all) of this cash was spent on increasing dividends and the Eaga acquisition.”
- “The Regulator queried why the Company was reluctant to accept what, on the face of it, appeared to the Regulator to look like a reasonable proposal from the Trustees (referring to the Trustee’s proposal of 26 March 2013. RE’s understanding was that the Finance Director, Richard Adam (“RA”), considered funding pension schemes to be a “waste of money”,particularly in respect of deferred members who did not actively contribute towards the business. RE thought that RA may consider one of his key roles to be the preservation of cash. DG supported RE’s understanding and explained that RA would consider an escrow arrangement or back-end loaded contributions on the basis they would unfairly burden his successors”.
Company wanting lower deficit based on “aggressive investment returns” and “a degree of re-risking”
- “The Company wanted to reduce the Trustee’s original deficit figure of £770 million by approximately £200 million, based on ‘more realistic’ assumptions relying on relatively aggressive investment returns and including no element of de-risking (and to some extent including a degree of re-risking). The Trustee would not be able to agree to this far lower deficit without sufficiently increased cash contributions.”